Date
25 September 2017

Li Ka-shing, the next big thing and everything else

Tycoon Li Ka-shing is not known as a man of many words in the Hong Kong press but he has opened up to mainland media in the last couple of years, including some wide-ranging interviews with economic journal Caixin over past few months. EJ Insight offers a taste of those conversations.

The next big thing

Caixin: You have seized three major opportunities — Hong Kong’s real estate boom, globalization and China’s market-oriented reforms — to bolster your business. Where is the next big chance?

Li: All industries can fall into one of two categories [old or new], and some traditional lines of business will continue to exist. But you have to make the most of emerging science and technology to stay ahead of the competition. The landscape of manufacturing will shift dramatically in the future as science and technology streamline the production process.

Cheap labor and land may no longer be an advantage and China’s manufacturing sectors face tremendous challenges in this sense.

For instance, MyFilip, a smartwatch for children, can be made in an office. All you need is an initial investment of just US$1.8 million to produce 10,000 units. MyFilip doesn’t involve many workers so there’s no need to set up a plant in China to tap the low cost of labor there.

I’ve also invested in an Israeli company called Kaiima which has a new technology that can improve agricultural output … by 30 percent. It’s truly remarkable because there’s no transgenesis [introduction of external genetic material] involved. A large part of Israel is covered by infertile land and the people there told me they use their brainpower as the fertilizer.

Dot.com bubble redux?

Caixin: You have made many investments in science and tech startups. What do you make of the wave of internet mergers and acquisitions? Some of the companies involved have already boosted their valuation to very high levels and some analysts fear we could be in for a repeat of the 2000 burst of the dot.com bubble.

Li: This time, technology is bringing real changes and evolution to industry, and, from my point of view, the situation is different from that in 2000. What I learn through talks with young entrepreneurs is that they have great passion to change the “world” as we know it. They always ask themselves a common question: If the sector could start over again, would we do things in the same way as we do now? Changes brought about by science and technology can offer more efficient, precise models as well as more cost-effective options. People in all trades must make these changes a high priority.

Keeping up with the best

Li: Hong Kong must do all it can to catch up in innovative technologies. The future is shaped by science and technology and our society needs to create more wealth and different opportunities to alleviate poverty. Hong Kong’s unemployment rate stands at a low level of 3.3 percent, but that’s no reason not to hurry up and improve our job market structure and talent.

Compared with major innovation hubs around the world, Hong Kong is falling way behind. For every 10,000 people in Israel, 140 are involved in technology, whether they’re scientists, engineers or technicians. The number for the US is 85, Japan 80, Taiwan 45 and Singapore 32. Hong Kong does not even register on these international rankings.

The key to innovation

Li: Let’s compare Hong Kong with Singapore. The social attitude and business environment in these two places are poles apart. Hong Kong is not accommodating to innovation. The general public in Singapore does not resent foreign enterprises making huge profits locally, or labor importation. And indeed, even with so many foreign workers, Singapore’s unemployment rate is still not higher than that of Hong Kong. Unlike Hong Kong, Singapore does not have China’s full backing but it does need to set aside expenses for national defense. But Singapore is apparently one notch above in innovation.

Back in 1997, Hong Kong was in the same gross domestic product league as Singapore, but today Singapore’s GDP is at least one-third higher. Hong Kong must sharpen its competitive edge.
Singapore was born without advantages [in terms of land and resources]; Hong Kong is a spoiled child by comparison.

Official helping hand

I have invested in some Israeli companies and during negotiations, what impressed me was the role of the Israeli government. Officials there told me that if I am not certain about the prospects of some candidate companies, the government will also invest money to share the risk.

“Aren’t you afraid of being accused of colluding with business?” I asked. They said they must create opportunities for the Israeli people. And I wondered if people would face the hail of harsh criticism if they did so in Hong Kong.

Europe is back on track

Li: Europe’s economic recovery is on a solid footing. Germany has already projected 1.7 percent growth in GDP this year while some northern European countries also offer reassuring prospects. Even Greece has managed to slow its decline. All of these facts point to a cautiously optimistic year for Cheung Kong (00001.HK) and Hutchison Whampoa’s (00013.HK) business there.

Also, comprehensive and well-established legal systems in many European countries are an added incentive for Hong Kong and mainland investors.

Our business is thriving in Sweden, Denmark, Austria, Belgium and the Netherlands. Austria’s economy is even more vibrant than Germany’s and several northern European countries seem to be humming. Our group’s 2013 net earnings in Europe were up on the previous year, and I think we will make more money this year.

Needless to say, some countries there still have their own woes — France is in the grip of welfarism. We have business in that country but not too much. Once a French minister heading a delegation to Hong Kong asked me why I chose Britain instead of France as a major foothold in Europe. I told him that I could not do in France what I’d done in Britain for a number of reasons. “Your tax rate is the highest in Europe while the rate in the UK is just 20 percent; the UK boasts a sound and fair legal system and officials there still welcome investment even after you sue the British government; and, France does not have the autonomy to adjust the euro’s exchange rate to rejuvenate its economy but UK can do that with its pound.”

– Contact the writer at [email protected] 

 

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